Division of property in a divorce can become much more complicated if one or both spouses own a business. Business interests may be difficult to value, as they require more than just looking at a balance sheet.
Earnings are typically the most critical factor in a business valuation. However, many other factors can come into play. Without the proper legal support, you may receive a division of assets that is less than you deserve. But you don’t have to face an asset division alone.
The Denver divorce attorneys at Halligan LLC have extensive experience leading Denver business owners through the divorce process. By working with appraisers, business valuation analysts, and certified public accountants, we protect your business interests to the best of our ability. Contact us for a free consultation.
Dividing Business Interests in Colorado Divorces
Colorado courts follow an equitable division norm when dividing marital property in a divorce. Equitable distribution doesn’t automatically mean an equal split, but rather a fair division based on different factors.
If you or your spouse owns a business, it can be seen as marital property if it was acquired or grew in value during the marriage. This means that the business or its increased value may be subject to division during the divorce process.
One major factor is fair market value, which can be determined by comparing the business with sales of a comparable business or the price at which the business would change hands between a willing seller and buyer.
Goodwill
Intangible assets like goodwill are also considered. Goodwill denotes the value of specific non-monetary, non-physical resources of the business. Customer loyalty and brand reputation are examples of goodwill.
Essential questions include, but are not limited to:
- Was the business created during the marriage?
- If the business existed before the marriage, did it increase in value?
- If the parties are joint owners in the business, how will the business be allocated in the divorce?
- What role have you and/or your spouse played in running the business?
After we get answers to questions like these, we can start developing a case strategy that can protect your business ownership interests. Our team helps clients in Denver with businesses, corporate interests, retail stores, restaurants, medical practices, construction companies, and more.
Factors That Play a Role in Allocating a Marital Estate That Includes a Business
A Colorado court cannot technically allocate a business to a non-owner in a divorce proceeding. However, when business owners divorce, courts can consider that value when dividing the rest of the marital estate. When assessing a business in the allocation of the marital estate, a range of factors are considered, including but not limited to:
When the Business Was Founded—Whether it started before or during the marriage is critical to determining its value to the marital estate.
Whether the Value Increased During the Marriage—When businesses established by one spouse before the marriage increase in value over the course of the marriage, this can be essential to assessing whether there is marital equity.
How Much the Business Is Worth—The value and specific assets held by the business need to be determined before allocating the marital estate between divorcing spouses.
How Businesses Are Valued in a Divorce
Valuing a business in a divorce is not always straightforward. It’s not just about looking at the financial statements or tax returns. It’s about understanding the complete picture, including tangible and intangible assets, future earning potential, and market conditions.
The valuation process usually involves three approaches:
Income Approach: This method considers the company’s income-producing capacity. It looks at past earnings to predict future income and then applies a discount or capitalization rate to arrive at a present value.
Market Approach: This approach compares your business to similar businesses that have recently sold. It’s similar to how real estate is valued.
Asset Approach: This method looks at the company’s average asset value, considering both tangible and intangible assets and liabilities.
In many cases, a combination of these approaches is used to determine the most accurate valuation. It’s also important to note that each business owner’s spouse may hire their own expert to run an independent valuation. In such cases, the court considers both valuations when making its decision, highlighting the need for experienced family law attorneys.
Possible Solutions for Divorces Involving a Business
Divorces involving financial interests can be particularly complex, but there are several potential solutions that can help protect your business in a Colorado divorce. Here are a few options:
Buyout: One spouse buys the other partner out of their share of the business. This is often done when one spouse has been the primary operator of the business. The buyout can be funded through a property settlement note, a refinancing of the company, or even an installment plan.
Co-ownership: Both spouses continue to own the business together, while other assets are divided in the divorce. This option requires a high level of cooperation and is usually only feasible when the divorce is amicable, and both parties wish to remain involved in the business.
Selling the Business: Sometimes, the best option is to sell the business to a non-owner and divide the proceeds. This can provide each spouse with a clean break and avoid future conflicts.
Deferred Distribution: In this scenario, the court doesn’t immediately divide the business. Instead, it awards one spouse other marital assets equal to their share of the business, with the understanding that they will receive their portion of the business’s value at a later date.
Each of these options has pros and cons, and what works best will depend on your circumstances. Our experienced attorneys at Halligan LLC can guide you through the property division and help you make an informed decision that shields your financial future.
How Our Law Firm Can Help
A Colorado divorce with business interests is never straightforward, but we fully understand that your business isn’t just income—it’s a significant part of your life and history.
Our team has extensive experience in family law and business valuation. We work closely with financial experts, accountants, and appraisers to ensure your business’s worth is fairly considered in the division process.
We don’t believe in one-size-fits-all solutions. Instead, we take the time to understand your case and build a strategy that aligns with your goals. Whether it’s negotiating a buyout, exploring co-ownership options, or advocating for you in court, we’re dedicated to achieving the best possible outcome for you.
With Halligan LLC by your side, your case is in capable hands. We handle the legal hassle so you can focus on moving forward.
Contact Us for a Free Consultation
Divorce is never easy, especially when a business is involved. But remember, you don’t have to go through this alone. At Halligan LLC, we’re here to provide the legal support and guidance you need during this challenging time.
If you or your spouse has business interests and is going through a divorce, it is crucial to seek the help of a family law attorney. The Denver divorce attorneys at Halligan LLC are experienced in handling cases involving complex business issues. They are ready to guide you through the process to ensure your needs are met. Call us to schedule a free initial consultation.
FAQ
Can my spouse take half of my business in a divorce?
The division of business assets in a divorce depends on whether the business is seen as marital property and how the court decides to distribute assets equitably. They may be entitled to a portion of your business, but it’s not always a 50/50 split.
What if I started my business before getting married?
If you started your business before marriage, it may be considered separate property and not tied to division in a divorce. However, any increase in the value of the company during the marriage could be regarded as marital property and subject to division.
Can I prevent my spouse from getting involved in the business during our divorce?
It depends on whether your spouse has an ownership interest or role in the business. If they do, you may be unable to prevent them from being involved. However, you can take steps to protect your interests, such as updating partnership agreements or seeking court orders.
Do I need an attorney if my divorce involves a business?
Yes, having an attorney is crucial if your divorce involves a business. The division of business assets can be complex and requires an understanding of family law, equitable division, and business valuation. An experienced Colorado divorce attorney can protect your interests.
